In a heavily redacted federal complaint, the FTC claims the San Diego-based chipmaker used a series of unfair practices to cut out competitors and maximize royalties for its standard-essential wireless patents.
The lawsuit comes one month after South Korea’s antitrust regulator fined Qualcomm $853 million for unfair licensing practices and coercive deal-making. Qualcomm vowed to appeal that penalty.
“Qualcomm’s conduct has harmed competition and the competitive process,” the FTC says in its 32-page lawsuit. “At a time when cellular technologies are expanding to new and varied applications, Qualcomm’s practices threaten further consumer harm in an industry in which competition and innovation are vitally important.”
Qualcomm is a dominant supplier of baseband processors, semiconductor chips that enable communication between a mobile device and cellular network.
The FTC says Qualcomm withholds its baseband processors from customers unless they agree to pay higher fees for using its standard-essential patents.
It claims the chipmaker “consistently refused” to license its standard-essential patents to competitors, though it agreed to do so on fair, reasonable and non-discriminatory terms when the technology was standardized.
By forcing competitors to pay high royalties to use its essential patents for baseband processors, Qualcomm effectively collects a “tax” on cellphone makers that buy processors from its competitors, the FTC says.
In 2011 and 2013, Qualcomm agreed to give Apple, the nation’s top smartphone seller, lump sum payments to offset the cost of paying patent license royalties. In exchange, Apple vowed to exclusively use Qualcomm’s baseband processors in new iPhone and iPad models.
The agreements provided Apple “billions of dollars in conditional rebates” that “effectively penalized Apple’s use of any baseband processors supplied by Qualcomm’s competitors,” according to the complaint.
“Qualcomm’s exclusive supply arrangement with Apple denied other baseband processor suppliers the benefits of working with a particularly important cell phone manufacturer and hampered their development into effective competitors,” the FTC says in the complaint.
It claims Qualcomm violates the FTC Act by using its position to monopolize the market for baseband processors.
The lawsuit, filed by FTC Assistant Director Geoffrey Green, seeks an injunction compelling Qualcomm to stop engaging in the alleged anticompetitive conduct.
Qualcomm did not respond to phone calls and emails seeking comment Tuesday.
The company’s stock price dipped more than 4 percent to $64.19 after news of the FTC lawsuit was reported Tuesday.
Qualcomm reported $6.5 billion in profits for the fiscal year that ended in September 2016.